Penalties for Tax Evasion
As per the Income Tax Act 1961, tax evasion can invite penalties such as:
1. Late filing of Income Tax Returns:
In case of non-filing of income tax returns in full compliance with relevant provisions of the Income Tax Act 1961, the assessing officer can levy a penalty upon the taxpayer of upto ₹5,000.
2. Concealing Income to Avoid Tax:
In such cases, as per Section 271(c), the penalty is between 100% and 300% of the tax evaded.
3. Not getting Accounts Audited:
Section 44AB mandates a taxpayer to get the account audited or furnish a report of the audit. In case of non-compliance, the penalty levied will be 0.5% of total sales, turnover of the gross receipts, or ₹1,50,000, whichever is more. If the taxpayer fails to present a report from an accountant as required under Section 92E, the penalty imposed is ₹1,00,000 or more.
4. Non-compliance with TDS Regulations:
Any individual who deducts tax at source or collects tax at source is also compelled to collect the tax deduction and Tax Collection Account Number (TAN). In case of failure to do so, a penalty of ₹10,000 will be levied. In case of delay in filing TDS or TCS, the company will have to bear a penalty of ₹200 per day till the delay continues and such a penalty should not exceed the TDS amount. Additionally, the tax authorities may impose a penalty for providing incorrect information or non-filing of TDS or TCS before the due dates, and the penalty may range between ₹10,000 to ₹1,00,000.
5. Willful attempt to Evade Tax:
As per Section 276C, if a taxpayer willfully attempts to evade tax or under-report income with the amount exceeding ₹25 lakh, it states imprisonment for a term of at least six months upto seven years along with a fine.
6. Providing incorrect PAN number or not furnishing PAN card number:
For providing an incorrect PAN no, the penalty levied will be ₹10,000, and for not providing a PAN card number, higher TDS shall be deducted. For example, the amount deducted will be 20% TDS instead of 10%.
Tax Evasion: Meaning, Methods and Penalties
Tax Evasion is an illegal activity where an individual or a company avoids paying the tax liability. Tax plays an important role in the growth of a nation, funding essential services, and driving social development. Yet, in the complex financial world, many people follow the wrong path to reduce their tax liability. India faces loss in big amounts in taxes every year due to private tax evasion. Penalties are high for such acts, and hence practising tax evasion must be avoided. Understanding the concept of tax evasion is crucial since individuals and businesses navigate the intricate web of financial responsibilities.
Geeky Takeaways:
- Tax Evasion refers to either illegal non-payment or underpayment of actual tax liabilities due.
- It can be determined by the Internal Revenue Service (IRS) regardless of the fact whether tax forms were filed with the agency or not.
- To determine tax evasion, the agency must be able to prove that the avoidance of tax was willful on the part of the taxpayer.
- It also includes fabricating income, claiming deductions without proof, failing to declare cash transactions, etc.
- The penalties are high for not disclosing income.
Table of Content
- What is Tax Evasion?
- Common Methods of Tax Evasion
- Penalties for Tax Evasion
- Conclusion
- Frequently Asked Questions (FAQs)
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